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Small Employer? Want to know a SECRET?

David P. Lind BenchmarkYou can save money—up to 35%—on your portion of an employee’s health insurance premium. Here’s the scoop on a new Small Business Health Care Tax Credit you may not know about:

  • Must have 24 or fewer full-time equivalent employees
  • Must offer health insurance
  • Must pay at least half of an employee’s single (not family) health insurance premium
  • Employees’ average annual wage must be less than $50,000

Do you meet all of these criteria? Then you’re eligible to claim a tax credit of up to 35% of your contribution toward health insurance premiums.

This tax credit is designed to encourage smaller businesses to offer health insurance. It’s part of the complex and controversial Patient Protection and Affordable Care Act (PPACA) passed in March of 2010, also known as the Health Reform Act. As of November, 2011, the IRS reported only 5% of taxpayers were claiming this credit.

How come most small employers aren’t taking advantage of this tax credit? Great question! Based on our 2011 Iowa Employer Benefits Study©, it’s because many aren’t  aware of it.

  • 57% of Iowa employers with 2 to 10 employees were unaware
  • 43% of Iowa employers with 11 to 25 employees were unaware

Also, the calculation is complex, with multiple steps. But don’t let that stop you. The best place to start learning more is here. To help small employers, the IRS created different tools for-profit and tax-exempt organizations. Be sure and talk to your tax advisor about this program, too. The sooner you take action, the sooner you can reap the savings.

 

Health Care Consumers vs. Users

David P. Lind BenchmarkEver thought about what it means to be a health care consumer versus a health care user?

Health care consumers have skin in the game, money on the table. They work to protect their health and actively look for the best health care value—researching options and making educated choices.

Health care users pay their monthly premium, go to an in-network provider and that’s that. Oh, they pay copays, but  they don’t have an incentive or the information to seek out the best value. Sadly, most of us fit under this category much too often.

Employers’ efforts to manage health care costs are becoming more focused on getting employees to become health care consumers rather than users.

National studies, such as Kaiser/HRET, and local research, such as the Iowa Employer Benefits Study©, show that more employers are embracing two interrelated concepts when offering health insurance coverage to employees:

  • Consumer-Driven Health Plans (CDHPs)
  • Wellness initiatives

In Iowa, only 4.5 percent of employers were offering components of CDHPs in 2005, but this number increased to over 20 percent by 2011. Also, more employers show interest in implementing wellness initiatives, in some cases providing financial incentives for employees to participate.

Consumer-driven health initiatives:

  • Emphasize making healthy lifestyle choices—eating right, exercising, not smoking, monitoring health numbers, etc.
  • Encourage employees (and their dependents) to seek out the most cost-effective care when seeking health care services. (Unfortunately, consumers are not privy to the actual costs. This is a big problem. See Clueless on Costs.(Blog)

More and more employers are working on plan designs that offer incentives to facilitate behaviors that improve employee health and lower health care costs.

VBID

Nationally, large employers are embracing a philosophy called Value-Based Insurance Design (VBID), providing incentives to employees to utilize evidence-based medical services. Deductibles, copays and out-of-pocket costs can be less to employees (and dependents) if they adhere to particular drugs regimens and treatments recognized as the most medically effective, and more if they choose tests and procedures deemed “overused.” There are pros and cons to everything, and VBID is no exception.

Until we can find the elusive ‘silver bullet’ to reign in health care costs, employers will need to assess new opportunities to help employees become more effective consumers of health care. These are some of the tactics currently being utilized. Their actual impact on employee behavior and health care costs remains to be seen.

Benchmarking Your Benefits

Employers pay a boatload of money to offer fringe benefits to their employees, up to 40% of the total compensation package.

With this much money on the line, smart employers perform an annual “tune-up”— using comparison analytics to see how their benefit offerings stack up to other employers’.  In other words, they benchmark.

Not benchmarking? Chances are good your competitors are, so it’s time to get in the game. Here’s the who, what, when, where and how for you to consider:

WHO 

Half the battle is knowing who to compare your benefits with (or against)!

Should you be looking at employers within a similar industry as your organization, or employers with the same number of employees, or both?

Ultimately, the real question you need to ask yourself is who is your targeted labor pool and what other organizations are going after your prospective employees.

WHAT 

Identify the specific benefits and their components you wish to compare.

If you compare retirement plans, you may want to know how your employer match (i.e. 401k or 403b) compares to matches offered by competitors.

How do your medical plan deductibles look? Too low or too high?

What about monthly employee contributions for dental coverage?

Maybe you want to know about ALL of your components—a good strategy.

WHEN

How often should you benchmark? Come on now! Benefits are a big investment. Do it annually.

WHERE 

Understand where your labor pool is located (i.e. 20-mile radius, entire state, Midwest region or all 50 states).

Are you looking at national benchmark norms to determine how competitive your plan offering is?

Or should you be looking at regional, statewide or local norms?

HOW 

The real trick is to use local benchmark metrics that reflect your labor pool. There are also many national benefit studies that provide a national perspective. Costs vary greatly (some are free, but they may be dated). For Iowa information, I’ll put in a shameless plug for DPLindbenchmark.com. We’ve been doing annual Iowa benchmarking studies for over a decade. Contact me at david@dplindbenchmark.com to learn more.